{"id":60327,"date":"2012-07-27T11:22:54","date_gmt":"2012-07-27T01:22:54","guid":{"rendered":"http:\/\/www.fnarena.com\/index.php\/2012\/07\/27\/newcrest-surprises-with-no-surprises\/"},"modified":"2012-07-27T11:22:54","modified_gmt":"2012-07-27T01:22:54","slug":"newcrest-surprises-with-no-surprises","status":"publish","type":"post","link":"https:\/\/staging.fnarena.com\/index.php\/2012\/07\/27\/newcrest-surprises-with-no-surprises\/","title":{"rendered":"Newcrest Surprises With No Surprises"},"content":{"rendered":"

\n\t – Newcrest<\/span> production report broadly as expected
\n\t – A lack of negative surprises well received
\n\t – New project delivery offers scope for a re-rating
\n\t – All brokers in FNArena<\/span> database now rate Newcrest<\/span> a Buy<\/strong><\/p>\n

\n\t
\n\tBy Chris Shaw<\/p>\n

\n\tNewcrest<\/span> ((NCM<\/span>)) delivered a solid June quarter production report, output of 587,000 ounces coming in comfortably ahead of March quarter production of 532,000 ounces. Driving the increase was better output from the key Cadia<\/span>, Lihir<\/span> and Gosowong<\/span> projects, which were enough to offset a slight fall at Telfer<\/span>. Costs were flat in quarter-on-quarter terms at $604 per ounce.<\/p>\n

\n\tThe result was broadly in line with what most in the market had been expecting, as Deutsche Bank for example had been forecasting production of 585,000 ounces at a cost of $609 per ounce and JP Morgan output of 591,000 ounces at a cost of $641 per ounce.<\/p>\n

\n\tGiven production broadly matched estimates, brokers in the market have made relatively modest changes to earnings forecasts. UBS has lifted its earnings per share (EPS) forecasts by 5-13% through FY14<\/span> to account for lower cost assumptions, while JP Morgan's forecasts have in general moved lower to reflect changes to commodity price and foreign exchange assumptions.<\/p>\n

\n\tConsensus EPS forecasts for Newcrest<\/span> according to the FNArena<\/span> database now stand at 138.2c this year, rising to 166c<\/span> in FY13<\/span>.<\/p>\n

\n\tThe highlight of the quarterly for Citi<\/span> was the lack of any negative surprise, as it is the first quarter without such a surprise for some time. With the result now factored in, Citi<\/span> expects the market's focus will turn to upcoming full year results and any update on production guidance in coming years.<\/p>\n

\n\tCiti<\/span> notes existing guidance, which is stale given operational issues in recent quarters, is for 3.5-3.7 million ounces of gold being produced in 2015. Citi<\/span> expects a revision to guidance to 3.0-3.2 million ounces in 2015, while the broker's forecast stands at 2.9 million ounces.<\/p>\n

\n\tDeutsche Bank has similarly adjusted its production expectations in coming years, forecasting output will grow from nearly 2.4 million ounces in FY13<\/span> to 3.3 million ounces by FY16<\/span>. This implies capitalised<\/span> annual growth in gold production of 9% for FY12-FY16<\/span>. Assuming the Cadia<\/span> Valley East and Lihir<\/span> ramp-ups progress seamlessly, Deutsche sees scope for a re-rating for Newcrest<\/span>.<\/p>\n

\n\tThe lack of any negative news from both projects in the June quarter suggests solid progress at both projects is continuing, with Lihir<\/span> MOPU<\/span> expects to ramp up production in the coming half-year and Cadia<\/span> Valley expected to deliver first commercial production in the December quarter. Higher capital costs at Cadia<\/span> Valley have been factored into broker models. <\/p>\n

\n\tUBS agrees a re-rating for Newcrest<\/span> is possible, but cautions this will require delivery of current projects. At the same time UBS suggests value in Newcrest<\/span> has improved following recent share price weakness, so rating is upgraded to a Buy from Neutral. <\/p>\n

\n\tCiti<\/span> also rates Newcrest<\/span> as a Buy, though the broker argues the stock remains more expensive in earnings multiple terms than major North American producers such as Newmont<\/span> and Barrick<\/span>. Given this implies a lack of significant interest in Newcrest<\/span> from offshore investors, Citi<\/span> prefers smaller growth vehicles such as Regis Resources ((RRL<\/span>)) and Beadell<\/span> Resources ((BDR<\/span>)) among Australian gold plays.<\/p>\n

\n\tThe upgrade by UBS means Newcrest<\/span> is now rated as a Buy by all eight brokers in the FNArena<\/span> database. The consensus price target stands at $31.76, down from $32.58 previously, with targets ranging from Deutsche at $28.05 to JP Morgan at $39.00. <\/p>\n

\n\tFNArena<\/span> is yet to receive update reports from BA-Merrill Lynch and Credit Suisse.<\/p>\n

\n\tJP Morgan sees its target as justified given it represents a multiple of 1.7 times on the operational portion of the broker's revised valuation. This is in-line with long-term trading multiples for major Australian gold companies. <\/p>\n

\n\tShares in Newcrest<\/span> today are higher, trading up 75c<\/span> at $23.12 as at 10.50am. This compares to a range over the past year of $20.89 to $41.27. The current share price implies upside of a little more than 40% relative to the consensus price target in the FNArena<\/span> database. <\/p>\n

\n\t
\n\tFind out why FNArena<\/span> subscribers like the service so much: "Your Feedback (Thank You)<\/a>" – Warning this story contains unashamedly positive feedback on the service provided.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

One upgrade for Newcrest and now it’s a full set of Buy ratings in the FNArena database, following a production report actually meeting expectations.<\/p>\n","protected":false},"author":9,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[6],"tags":[22],"acf":[],"_links":{"self":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/60327"}],"collection":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/users\/9"}],"replies":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/comments?post=60327"}],"version-history":[{"count":0,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/60327\/revisions"}],"wp:attachment":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/media?parent=60327"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/categories?post=60327"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/tags?post=60327"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}